CRICKET
INKS DEAL TO SELL IPHONES

Firm is first carrier in U.S. to offer models without a contract

Cricket’s iPhone

Cost: $400 for iPhone 4 and $500 for iPhone 4S. Monthly service is $55 for unlimited calls, texting and data (up to 2.3 GB).

When: The models will go on sale June 22.

Cricket Communications of San Diego will begin selling models of Apple’s iPhone in about three weeks, making it the first no-contract wireless carrier in the U.S. to offer the popular device.

Cricket, a subsidiary of Leap Wireless, will sell the iPhone 4 and the iPhone 4S in most cities where it operates its own network, or about 60 markets. The phones will work nationwide on the company’s $55-a-month rate plan. There are no additional roaming charges.

“Over the last couple of years, the iPhone has become really the material operating system in the marketplace and has driven considerable consumer demand,” said Matt Stoiber, senior vice president of devices for Cricket. “We get a lot of requests for the iPhone. This is about satisfying a customer need.”

But satisfying that need comes with a hefty upfront price tag. Cricket will sell the iPhone 4 for $400 and the iPhone 4S for $500.

That’s more expensive the $100 to $200 charged by Verizon Wireless, Sprint and AT&T.

Apple prices the iPhone 4S to carriers at $650. Large carriers subsidize the phone in exchange for a two-year contract. Cricket offers a smaller subsidy. But its subscription is month to month with no contract.

Targeting ‘value seekers’

Cricket’s traditional customer base has been low income, urban and ethnic mobile phone users attracted to no-contract rate plans. The price tag for the iPhone may be out of reach for many of these customers.

Recently, however, Cricket has been aiming to attract a different kind of subscriber, which it calls “value seekers.” They see the monthly $55 unlimited voice, text and data plan as a better deal in the long run compared with two-year contract plans from postpaid carriers such as Verizon, AT&T and Sprint.

“As we look at this industry, it is very clear to us that postpaid customers present a big opportunity,” said H. Doug Hutcheson, chief executive of Cricket parent Leap Wireless. “They are tired of two-year contracts.”

The company claims that over two years, Cricket iPhone subscribers would save $1,000 compared with two-year contracts with major carriers, even though the initial cost of the phone is higher. That’s because its monthly $55 plan costs less than similar plans from larger carriers.

In a conference call with analysts, Hutcheson said the company inked a three-year deal with Apple and agreed to spend $900 million on iPhones over the life of the contract.

Hutcheson said the iPhone will boost loyalty, allowing Cricket to retain customers longer. But analysts pointed out that the company’s subsidy costs on iPhones is greater than the amount it currently spends subsidizing other smartphones — which will likely increase its expenses in the short run.

The company’s shares closed unchanged Thursday at $5.77 on the Nasdaq.

Network strain dismissed

Cricket’s monthly plan caps data use at 2.3 gigabit per month, at which point the service will slow down. The data cap is slightly smaller than under similar plans from AT&T, Verizon and Sprint.

Hutcheson said Cricket will introduce additional high-end phones that typically would be found at two-year-contract carriers. It will implement session-based data pricing and other options to let consumers better manage their monthly bills based on use.

While heavy Internet use from iPhone owners created a strain on AT&T’s network in the past, Cricket officials are confident that its network can handle any increase in traffic generated by the iPhone.

Both iPhone models will be available in Cricket company-owned stores and some dealers in about 60 cities — as well as online — starting June 22. Cricket has 6.2 million subscribers, making it the sixth-largest wireless carrier in the U.S.